PARSIPPANY, N.J. — B&G Foods, Inc. is planting the seeds to grow the Green Giant vegetable business, which the Parsippany-based company acquired from General Mills, Inc. on Nov. 2, 2015, for a purchase price of approximately $765 million in cash. The key to reversing distribution losses for the brand, which B&G suggested was neglected by its former owner, is innovation.
|Robert Cantwell, president and c.e.o. of B&G Foods|
“2016 will be a year of fixing Green Giant’s foundation, initiating the innovation pipeline and developing a world-class summer marketing campaign,” said Robert Cantwell, president and chief executive officer of B&G Foods, during a Feb. 25 earnings call with financial analysts. “We bought an iconic brand that was not part of the seller’s long-term strategy, but I promise you it is a major part of ours. We went into the acquisition understanding that 2016 would be a year focused on addressing customer issues, including lost distribution and trade programs.”
Ultimately, B&G expects Green Giant will contribute annual sales of $550 million — albeit “a little less” in 2016 due to continued distribution losses and the impact of a stronger U.S. dollar — and EBITDA of $95 million in 2016, with more than $100 million expected in 2017 and beyond. The company has committed to investing roughly $30 million in brand support and has hired a firm to help with insights, strategy development and building a consumer marketing campaign set to launch at the end of the year or the beginning of next year.
“We are trying to get some of the core where it has been lost, but it really comes back (to) walking into that buyer’s office with a lot of new innovation, and we’ve actually been out there in the very short time of our ownership with the help of our key outside parties who are helping us, really developing some innovation as we speak, and we’ve been presenting some of that innovation already to key retailers who are getting excited about it," Mr. Cantwell said. "We won’t be able to launch that innovation probably until late summer/early fall. But we are pushing for late summer because, again, we bought a business that had no innovation in the pipeline.”
Mr. Cantwell said retailers already are receptive to his company’s new Green Giant products, but he declined to share specific details of the innovation.
“There is basic innovation — which is kind of what I call a little bit more of the ‘noise’ innovation, which is just creating more flavors, whether it’s robust, whether it’s a Mexican-flavored corn or something like that, that is relatively easy, and we have to do some of that, too, because we need a rightful share of that — and then it becomes more what I would call more ‘innovative’ innovation, which is something that is unique, and it can be packaging, and it can be product, and we are looking at both and we have some really good ideas on both.”
Meanwhile, integration of the business is on track, Mr. Cantwell said.
“During most of 2016, a majority of our sales distribution and procurement functions will continue to be performed by General Mills, pursuant to a transition services agreement,” Mr. Cantwell said. “Full transition of the sales and distribution functions is expected to happen in the second half of 2016, but we expect that General Mills will continue to perform some manufacturing services for us until sometime into late 2017.”
In November and December under B&G Foods’ ownership, Green Giant contributed $106.2 million in net sales, as the company’s comparable base business sales were relatively flat for the quarter and year, Mr. Cantwell said.
For the year ended Jan. 2, B&G Foods net income was $69,090,000, equal to $1.22 per share on the common stock, up 69% from $40,956,000, or 76c per share, the year before. Net sales were $966,358,000, up from year-ago sales of $848,017,000. Gains from Ortega, Bear Creek and Cream of Wheat contributed to growth for the year.Net income for the fourth quarter was $10,960,000, or 19c per share, down 4.3% from $11,454,000, or 21c per share, for the prior-year period. Net sales were $342,291,000, up 44% from $237,990,000.